Government to inspect financial records of BYJU's, India's most-valued start-up
It is an endless queue of trouble for edtech giant BYJU'S. India's most valuable start-up has been under the scrutiny of lenders and investors for a while. Now, the Ministry of Corporate Affairs (MCA) has stepped into the picture. According to Bloomberg, the MCA has ordered the inspection of BYJU'S account books. The government has asked for a report in six weeks.
Why does this story matter?
The MCA inspection adds to BYJU'S worries. Last month, the company lost three of its non-promoter directors and auditor on the same day. The directors cited differences between CEO Byju Raveendran. Meanwhile, the start-up is also battling its creditors over the $1.2 billion term loan. BYJU'S has been trying to mend relationships with investors and lenders. The inspection may add another hurdle to that.
Government ordered inspection after conducting internal assessment
The MCA has decided to conduct the inspection after an internal assessment of the company's state of affairs. The inspection will decide whether the government will escalate the matter to the Serious Fraud Investigation Office (SFIO). Previously, a Hindu Business Line report said the SFIO has begun a probe into BYJU'S affairs. The company had, however, denied the report.
Ex-auditor explained delay in accessing financial statements, underlying books
The MCA's involvement in BYJU'S affairs comes against the backdrop of the resignation of Deloitte, its auditor. Deloitte had explained its inability to begin the audit of BYJU'S FY22 financial statements due to delays in accessing financial statements, underlying books, and records. The FY22 statement should have been placed before shareholders at an AGM by September 2022.
SFIO is a multidisciplinary agency
The auditor's resignation and delay in publishing the financial statement is what prompted the government to explore the possibility of involving SFIO. SFIO is a multidisciplinary agency with experts from various disciplines, including accountancy, forensic auditing, banking, and law, among others. Although the Registrar of Companies (RoC) can inspect books, the government reportedly prefers a probe by SFIO.
Deloitte did not allege financial irregularities or lack of cooperation
BYJU'S may emerge unscathed from the inspection, as Deloitte did not mention any non-cooperation by the management. Nor did it talk about any financial irregularities or fraud in its letter of resignation to the board. The auditor even thanked BYJU'S management for the cooperation extended during their tenure. The government may take this into consideration while ascertaining the firm's compliance default.
